Friday, June 02, 2006

PLATFORMS AS BUSINESS MODELS

The companies we studied approached the challenge of platform focus in remarkably consistent ways. Specifically:

1. They put credible chief growth officers in charge: In every successful case, the head of an NGP unit, or chief growth officer, was a future contender for the CEO position or a unique senior executive with credibility, organisational skill and a deep interest in opportunities beyond the current mix of businesses.

2. They put an organised and empowered team in place to identify and develop new ideas: The NGP team should consist of three or four senior executives, who possess a thorough understanding of the company’s markets and operations and are also entrepreneurial and have experience in building new businesses. They should have the authority to take big decisions quickly on major investments, and they should be able to advise the operating managers they recruit for the businesses created on the platform.3. They have NGP units that are independent and embedded: They have to be independent, because looking for NGP opportunities requires an ability to step out of an existing business model and culture. While a strong measure of freedom is important an NGP unit must be well embedded in the corporation in order to identify existing knowledge, processes and assets.

4. Th ey guarantee financial independence: Typically, we found that in successful companies, investment capital for the unit was separated from the budget and operated as a discretionary enterprise growth fund of some kind. The fund investments were authorised by the investment committee or a representative group within the executive team office.

5. They systematically defi ne the processes of NGP creation and the roles of various participants: In the successful companies we studied, the CEO framed the challenge, then the executive team selected the chief growth offi cer, created the unit, identifi ed new domains and took stock of core capabilities. Th e NGP team shaped new platforms, identifi ed capabilities to be assembled and noted potential acquisitions. Th is careful attention to articulating the process of platform innovation & related activities builds companywide commitment to the idea of NGPs.